Services 'Collapse' Batters Stocks

By

Annelena Lobb

Updated Feb. 6, 2008 3:37 a.m. ET

Stock markets scraped themselves off the pavement last week as economic optimism took hold. But a bleak reading on the services sector Tuesday, followed by cautionary language from the Federal Reserve, fanned recession fears and led traders into by far the worst day for the Dow industrials in 2008.

The Institute for Supply Management, which released its findings earlier than scheduled amid concern that the information had been leaked, reported that the U.S. service sector contracted for the first time since March 2003 in...